U.S. Tariffs on Airbus Jets Increase to 15 percent

 - March 18, 2020, 11:14 AM

The U.S. action to increase tariffs on Airbus aircraft from 10 to 15 percent took effect on Wednesday, sending in motion the latest effort by President Donald Trump to punish Europe for what constitutes illegal government subsidies as determined by an October 2019 World Trade Organization ruling. The tariff increase accounts for part of new WTO-sanctioned countermeasures on $7.5 billion worth of European goods imposed in a trade dispute with the European Union, France, Germany, Spain, and the UK.

In a statement issued Wednesday, Airbus called on the U.S. Trade Representative (USTR) to suspend the tariffs and engage in a negotiated settlement.

“With regards to the ongoing WTO dispute on Boeing and Airbus support, Airbus reiterates its call for the USTR to suspend the tariffs it applies on aircraft and to come to the table to find an agreement on government support as the only sensible and sustainable way to end this dispute,” it said. “The evolution of the global Covid-19 pandemic and its impact on the aviation industry reinforces the need to put this outdated case behind us and find a sustainable way forward for our industry.”

On Tuesday Trump expressed support for a $60 billion bailout package requested of the federal government by Boeing. “I think we have to protect Boeing,” he said. “Obviously when the airlines aren't doing well then Boeing is not going to be doing well. So we'll be helping Boeing."

The tariffs do not apply to Airbus jets assembled in Mobile, Alabama, and the European airframer has already moved to mitigate the potential damage to its U.S. airline business by announcing an increase in production at its Mobile plant from five to seven per month by the end of the year.

The U.S. action comes days after the Washington state legislature voted to withdraw tax breaks granted to Boeing to keep 777X wing production in the Puget Sound area. According to Boeing, the repeal puts it in compliance with WTO rules. The WTO has also cited improper subsidies by Washington state to Boeing, and the sides expected an imminent final ruling on what countermeasures the European Union could impose. “[The] repeal by Washington state of its aerospace business and occupation tax rate brings the United States into full WTO compliance by fixing the single finding against the U.S., further emphasizing our commitment to free and fair trade,” said Boeing in a March 12 statement. “We applaud Washington state leaders for their partnership in ensuring full compliance with WTO rulings."